October
30, 2003
Oil
analysts turn their attention to Venezuela
By Sheila McNulty and Andy Webb-Vidal
(Financial Times) - "With the attention
of the world's big oil and gas companies focused
on deals in Russia, some analysts cannot help
noting that some of the largest energy reserves
outside the Arab region are actually to be found
in Venezuela".
"Many analysts say the risk of doing business
in Venezuela appears substantially less than that
attached to Russia".
'"In Venezuela, the long-term risk is probably
less,' says Amy Myers Jaffe, the Wallace Wilson
Fellow for Energy Studies at Rice University's
Baker Institute. 'Chances are that they will not
renationalise.' The possibility of renationalising
is not only ever-present in Russia, but the analysts
say there are other risks as well".
"Substantial investments still must be made
in the Russian infrastructure to enable companies
to get oil and gas out. Analysts do not rule out
the politically connected Gazprom or Lukoil companies
stepping in to block a foreign investment that
is undercutting one of their own. And a cold winter
could lead Russia to lower exports by way of huge
export tariffs or restrictions".
"By contrast, Venezuela has made it clear
that it needs foreign investment in its all-important
oil industry and is willing to accommodate the
majors to get it".
"Companies such as ConocoPhillips, one of
the biggest oil investors in Venezuela, insisting:
'We like our position in Venezuela'. Certainly
the situation has slowed new construction in that
country, and ConocoPhillips' production was affected
by the strikes, but it was back to normal by April
and has been level since then".
'"In the oil industry, the perceived risk
in Venezuela is higher than the real risk,' says
Robin West, chairman of PFC Energy, the industry
consultant. 'It's easier to do business in Venezuela
than in Russia or the Middle East."'
"Rather than seeking investment in its traditional
oil sector, Venezuela is hoping to develop its
copious reserves of extra-heavy oil and its virtually
untapped natural gas deposits".
"'Venezuela is going through a transition
and they realise that they need to attract a substantial
amount of foreign capital' says Larry Goldstein,
President of the Petroleum Industry Research Foundation".
"The Chávez government appears determined
to attach greater importance to its heavy crude
reserves at the strategic, long-term level. Although
these would be hard and expensive to exploit,
Venezuela wants Opec to include them in counting
its available oil, thus allowing it a much larger
Opec output quota".
"Venezuela has reserves of at least 270bn
barrels of extra heavy crude in the Orinoco Belt.
If these were added to its existing reserves of
76bn barrels, Venezuela would leap above Saudi
Arabia, which has proven reserves of 262bn barrels".
"There are already four existing heavy oil
strategic association projects, and multinationals
involved include ExxonMobil, TotalFinaElf, Statoil,
ConocoPhillips and ChevronTexaco".
